Canadian Dollar Update June 4, 2019 – Oil falls and Canadian Dollar rises
USD/CAD Open: 1.3427-1.3428 Overnight Range: 1.3419-1.3455
The Canadian dollar was rangebound in overnight currency exchange markets. Oil is at $52.98 and gold is at $1,328. US markets are higher today. Factory and durable goods orders data in the US is scheduled to be released today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3474. Support is at 1.3393.
Canadian dollar traders ignored another steep plunge in crude oil prices and continued to buy the currency. West Texas Intermediate, the North American benchmark price for oil, traded at $59.72/barrel last Thursday. Four days later, WTI prices are probing support at $52.50/b. The 12.1% drop was fueled by escalating US/China trade tensions, elevated US crude inventories and news that Russia is opposing the extension of production cuts beyond the end of June. This has exacerbated the down move.
China released a “White Paper” titled China’s Position on the China-US Economic and Trade Consultations. It blamed the US for the collapse in the trade talks. The Office of the US Trade Representative and the Department of Treasury issued a joint statement to refute China’s claims. It opened with the following: “The United States is disappointed that the Chinese have chosen in the “White Paper” issued yesterday and recent public statements to pursue a blame game misrepresenting the nature and history of trade negotiations between the two countries”.
To oil traders, China/US war of words, suggests the trade dispute will not be resolved very quickly, which would lead to slowing global growth and by default, less demand for crude.
Canadian dollar traders ignored the oil market and took their direction from broad US dollar moves. The US retreated against all the G-10 major currencies yesterday and managed to hang on to those gains overnight.
The US dollar sell-off is modest and was sparked by concerns that the Fed’s next move would be to cut interest rates. St Louis Fed President James Bullard suggested that the economic risk posed by trade tensions and low inflation may lead to lower rates. He said “A downward adjustment of the policy rate may help re-center inflation and inflation expectations at the 2 percent target”. That comment knocked US Treasury yields even lower and fueled broad US dollar selling.
EURUSD retraced early gains when Eurozone inflation data missed expectations. May CPI rose 1.2% compared to 1.7% in April. EURUSD dropped from 1.1276 to 1.1252 on the news.
GBPUSD traded choppily. It fell from 1.2684 to 1.2643 when May Construction PMI missed its forecast (actual 48.6 vs forecast 50.5). Prices have rebounded in early Toronto trading.
There isn’t any top tier Canadian or US data reports released today. However, traders are looking forward to a speech by Fed Chair Jerome Powell, this morning. His speech is titled “Monetary Policy Strategy, Tools, and Communication Practices”. Traders will be paying close attention to see if he is leaning toward the St Louis Fed view or if he maintains his view that recent weakness is transitory.
Today’s Suggested Range USD/CAD: 1.3370 – 1.3470
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